Republicans Weigh In on S&P Outlook

House Republicans seized on the warning that Standard & Poor’s might downgrade U.S. debt as evidence Congress needs to cut spending in conjunction with any legislation to raise the country’s borrowing limit.

House Majority Leader Eric Cantor (R., Va.) called S&P’s move to cut its outlook on the U.S. to negative “a wake-up call,” saying it “makes clear that the debt limit increase proposed by the Obama Administration must be accompanied by meaningful fiscal reforms that immediately reduce federal spending and stop our nation from digging itself further into debt.”

The announcement Monday that S&P has changed its outlook on U.S. Treasury debt from “stable” to “negative” underscores Republican arguments that Congress and the White House need to agree on a package of spending cuts and entitlement reforms to pare the deficit as part of a deal to raise the country’s debt ceiling.

The ratings agency said Monday that failure to reach an agreement on deficit-reduction would hinder the country’s ability to borrow money at historically low rates, adding, “We believe there is a material risk that U.S. policymakers might not reach an agreement on how to address medium- and long-term budgetary challenges by 2013.”

Mr. Ryan responded to the S&P decision on Monday by calling the swelling U.S. debt “the most predictable economic crisis in our history.” Mr. Ryan, whose blueprint would drastically reduce spending while revamping Medicare and Medicaid, blamed Mr. Obama for failing to adequately address the debt.

“The President’s budget locks in Washington’s recent spending spree, adds $13 trillion to the debt over the next decade, and accelerates our nation toward a fiscal crisis,” Mr. Ryan said in a statement. “A campaign speech is no substitute for a serious, credible budget. The President and his party’s leaders must put an end to empty promises and work with us to avert this looming economic crisis.”

The budget chairman has become a target for Mr. Obama and fellow Democrats because his plan would fundamentally transform Medicare from a government-run program largely financed by taxpayers to a program run by private insurance companies in which people under the age of 55 would bear an increased financial burden. The House approved his budget along party lines on Friday, and Democrats have begun targeting Republicans who supported it.

The partisan back-and-forth between the president and House Republicans belies deficit reduction talks under way in the Senate on a package of spending cuts, entitlement reforms and tax increases to help balance the budget over time.

The battle lines between the White House and House Republicans are firming up as both sides shift from legislative mode to campaign mode.

“As S&P made clear, getting spending and our deficit under control can no longer be put off for another day, which is why House Republicans will only move forward on the President’s request to increase the debt limit if it is accompanied by serious reforms that immediately reduce federal spending and end the culture of debt in Washington,” Mr. Cantor said.

As congressional Republicans threaten not to increase the debt ceiling without a corresponding package of cuts, 112 mostly liberal House Democrats, led by Vermont Rep. Peter Welch, sent their leaders a letter Monday demanding a debt-limit increase that isn’t tied to program cuts.

“The debt ceiling vote is about one thing: affirming that America pays its bills. It does not authorize new taxpayer obligations; it affirms to the world our commitment to pay obligations already incurred,” they wrote. “To leverage our duty to pay our bills to achieve a partisan advantage in budget disputes, jeopardizes the full faith and credit of the United States of America.”

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